In the terminal

Many banks in Eastern Europe advised its customers to loans in foreign currencies. Then came the war and crises: Even the whole income is often no longer enough to pay off the debt.

By Florian Hassel

It seemed to be a good decision, as Polina Godsuljak decided to buy in Kiev apartment for herself and her son. The then 33-year-old pharmacist earned in August 2006 about 4,000 hryvnia, converted $ 800. Enough, she thought; enough, also said the bank manager to take out a loan for a one bedroom apartment with fifteen years duration. That the loan, because of the lower interest rates, not was on the Ukrainian currency hryvnia, but in US dollars, Godsuljak appeared only as a footnote in the loan agreement.

2008 but, at the beginning of the global financial crisis, the hryvnia dropped sharply in value. No longer were five hryvnia for one dollar is now overdue, but eight. Now had Godsuljak spend their entire salary to pay the monthly loan installment of $ 400.

“My livelihood I could only thanks to the help of my parents deny,” she says. “I hoped it would get better soon.” But it got worse. 2014, with the revolution in the Maidan and continues to this day war against Russia and organized by Moscow separatists, the course of the Ukrainian currency crashed. The end of 2014 cost one US dollar almost 16 hryvnia. When in 2015 it became clear that the war was going on and Kiev was on the verge of insolvency, the downturn of the Ukrainian currency continued, up to 28 hryvnia for one dollar. After the International Monetary Fund (IMF) had Ukraine pledged $ 17.5 billion loans, the price of Hrynja rose slightly, but must Ukrainians still muster almost 24 hryvnia for one dollar.

From your credit Polina Godsuljak has been repaid $ 45,000. “But I owe the bank still $ 20,000 -. Plus interest” Godsuljak today earns 4800 hryvnia – converted $ 202. Your home loan, they would have every month with nearly 17 000 hryvnia to pay back – even with the help of her parents her this is not possible.

In February Godsuljak has ceased all payments.

Since then, she spends much of her free time in Kyiv the government quarter. A few hundred meters next to the Parliament, in a monumental, white and dark pink-painted buildings, the Ukrainian National Bank. Next to the entrance with tree-four stone lions columns Godsuljak and other activists have pitched the protest camp “Financial Maidan”.

Even a sale of the apartment would not even have brought half of bank debt

Estimate, 50 000 families have received loans in dollars, euros or Swiss francs for a new car, houses or apartments in Ukraine. Many can these loans that match with a value of 5.2 billion euros a tenth of an annual economic output of Ukraine, not repay. By the end of 2014, a fifth of all loans in Ukraine was, according to the IMF in default, that is, the loans were not or only partially operated for at least 90 days. Also in 2015 it goes for many Ukrainians financially downhill – and therefore also with the payment practices.

Not only Ukrainians have problems with loans that they have taken up in better times in euros, dollars or Swiss francs. In the boom before the financial crisis advised financial and banking consultant in Hungary and Poland, Croatia and Greece, Romania, Serbia or Austria customers to loans in foreign currencies, mainly in Swiss francs (CHF) – the unrivaled low interest due. An estimated two million people followed the advice.

562 000 households need to repay loans, according to the CHF of financial supervision in Poland alone. According to the European Central Bank, these loans as of April 1 had a value of 38 billion euros – an eight percent annual economic output in Poland. Similarly high is the exposure to Swiss franc loans as in Croatia – there correspond CHF loans of 3.4 billion euros over six percent of annual economic output. And the Greeks have yet to repay franc loans for almost ten billion euros – nearly five percent of what the country earned in the year.

“Financial Maidan” activists called their protest camp in front of Ukraine’s National Bank in the government district of Kiev.

(Photo: Ullstein image)

As in other countries, most people took on their Swiss franc loans before the financial crisis in 2008 also in Poland. In Poland’s ancient capital Krakow, the translator Tomasz Sadlik decided in early 2007 not to pay any more rent, but to buy an apartment with a loan of over CHF 250 000. (then 600 000. zloty). But since the financial crisis strongly won the Swiss franc as a safe haven in value. In Poland, a franc instead 2,35 zloty in spring 2007 will cost almost four zloty today.

The end of 2012 could no longer service its Sadlik credit. A few months later, so Sadlik, announced the Raiffeisen Polbank, a subsidiary of the Austrian Raiffeisen, the credit and demanded Sadlik on the payment of CHF 272 000. “Even with the sale of my apartment I could not even put together half of the money,” says Sadlik. The translator moved against the bank to court – and hopes that Poland follows the model of Hungary. There participated in the boom before the crisis more than a million families franc loans worth at that time nearly 29 billion euros – 2008 almost a quarter of the Hungarian annual economic output.

But when the National Populist Viktor Orban came to power in Hungary, he forced the banks in late 2011 to the high part of losses to loans denominated in Swiss francs or euros. End of November 2014. Hungary followed Parliament with a law that forced banks to change all still denominated in Swiss franc loans in the Hungarian currency forint.

In Poland, Croatia or Ukraine borrowers now hoping for a similar assistance from the policy as in Hungary.

“We want to repay the loans at the rate in force when we signed up.”

In Kiev Feok Tistowa, a 41 year old food inspector has already lost the right to their homes. Now she hopes that her least more oppressive debt are adopted. Seven years ago, and her husband Alexander Tistowa had bought an apartment on credit – for dollars then converted 160 000. Only increased the rate of the dollar, then her husband lost his job. 2012 could the Tistowas their credit no longer operate and therefore entered the apartment to the bank from. Meanwhile, the apartment is sold, but as prices have fallen, the selling price was not enough to relieve the credit. “Our apartment we lost,” she says, “and it goes to the bank, we also have debt for the rest of our lives.”

The fact that the rates of local currencies in crises can break sharply and foreign exchange loans always carry a high risk – about neither Polina Godsuljak and Feok Tistowa have informed in Krakow in Kiev Tomasz Sadlik before they signed their loan agreements. “When I say an international bank, the risk is low and shows me appropriate graphics – Who am I to doubt it”, located approximately Sadlik justifies. In addition, so Sadlik that approach his bank had been unfair. “The loan agreement with eleven sides small printed conditions was handed to me ten minutes before the signature. The Bank also not allowed to take the draft agreement before signing below, and talk through about a lawyer or an independent consultant.”

An estimated two million people in the Ukraine and other Eastern European countries have taken out loans in foreign currencies.

(Photo: Igor Golovnov / Alamy)

The Vienna Raiffeisen headquarters commented Sadliks assertion on request of the Süddeutsche Zeitung so: “Every customer of Raiffeisen Polbank can naturally study its loan agreement before signing in peace and also submit an independent consultant to assess.” In Kiev, the protesters in front of the National Bank borrowers consistently report their banks they would have without them about risks, pushed to downright currency loans.

“When I wanted to take my credit hryvnia 2007, the bank said: We can make out the loan only in dollars,” said the official Alla Mostovaya from Kharkov. Polina Godsuljak, Kievan pharmacist with the Studio, reports like this: “I had with the bank credit in the hryvnia discussed – but when I came to sign the contract on dollars was made out.”

The Ukrainian Parliament passed a law in 2014, the banks – such as in Hungary – prohibits, in distress borrowers immediately expel from their homes. In May 2015 also took a designed brokered by the Ukrainian National Bank agreement in force, according to which the banks commit a portion of the foreign currency loans at the rate of the end of 2014 – ie before the further significant losses of the hryvnia.

And so their bank, the Hungarian OTP, Polina Godsuljak, the pharmacist has with the Studio, offered to refinance their loan at the rate of 16 hryvnia per dollar. “But I can not afford it,” she says. “We want to repay our loans at the rate in force when we signed our credit agreements,” says spokeswoman Alla Mostovaya. In fact, the parliament in Kiev already voted in first and second reading of a bill that would force banks in the event of its adoption, stipulate the price from the date of signature for all foreign currency loans – and pocket billions in losses.

Semi-detached house in the diplomatic quarter: With the high rent of foreigners can use the loan

Also in Poland went currency borrowers in the offensive. “We demand that our Parliament also passes a law that forces all banks to commit our lending rate at the date of signature,” says Tomasz Sadlik, who called the protest group ProFuturis to life through Facebook and now with regular demonstrations in Warsaw and other cities for his concern advertises. And Poland is in an election year: In October a new parliament and thus also a new government is elected. The current center-right government is in the polls back significantly. And so indeed rejected Finance Mateusz Szcurek the demand Sadliks arguing from that it was “not the government’s job to protect people from all sorts of risks in life.”

But Prime Minister Ewa Kopacz was reflected rhetorically been on the side of foreign currency borrowers. “If I have to choose between the interests of the banks and those of the people who have received such loans, I stand behind the people – at the expense of the banks, not the state budget.” Such change in sentiment shows the power of small but determined groups. The is also strengthened by news such as the mid-June spread: The 35-year-old Leszek C. has committed suicide in March because he was unable to repay a Swiss franc loan.

Swiss francs, euros and dollars rose sharply in value – the repayment of loans in foreign currencies is now expensive for some borrowers even impossible.

(Photo: Ullstein image)

Generally, however, is in Poland, unlike in Ukraine, not only the value of the franc in the past few years, but also the economy has grown and with it wages and earnings. A well-paid Warsaw employee who wants the Süddeutsche Zeitung to describe the plight of the Franks borrowers who admits that he has taken his own credit than half a million Swiss francs in order to build a semi-detached house in a posh diplomatic quarter and a half of affluent foreigners for rent. With the high rent, he can use his credit.

Polish Bank Association suggested the end of May before the establishment of two relief funds, the banks would at up to 800 million zlotys to finance (192 million euros) to help poor, distressed currency borrowers. “But even this”, says the spokesman of the Banking Association, Przemysław Barbrich. Because the statistics speak that the vast majority of foreign currency borrowers are not in Poland in existential distress. “From nearly 562,000 households with loans francs are Poland’s Financial Supervision According to less than 10 000 households with their payments more than 90 days in arrears – ie less than two percent.” From mass protests, the borrower is in the face of more than 2500 demonstrators also no question. ProFuturis, the lobby group of CHF borrowers counts just 700 members, so the leader Sadlik.

Banks are popular neither in Poland nor in the Ukraine or in Croatia. In the Adriatic country whose economy, unlike the Polish kriselt strong, tens of thousands of people are taken because of their boom times franc loans under pressure. As in Poland, a new government is elected in Croatia, as in Warsaw is also in Zagreb, the current government under pressure. And so, Parliament froze the rate for the franc loans already the end of January 2015 to a price lower than the market price a – albeit only for a year. Although Croatia’s Supreme Court decided, currency loans are legal; each borrower must prove individually that a bank was wrong. But an active lobby group Udruga Frankowa, calls to codify the rate for the franc loans at the level at the time of graduation.

This way the Ukraine is well advanced – but only at first glance. Although probably already follows the beginning of July the third reading of the litter 1558-1, which would force the banks to commit to the low exchange rate. In fact, this is probably only a populist initiative to calm the protesters bill. The National Bank of Ukraine is strongly opposed to such a law, which would bring the already ailing banks of Ukraine losses up to four billion dollars.

End of February 2015, Ukraine committed itself in the form of President Petro Poroshenko, Prime Minister Arseniy Yatsenyuk, Minister of Finance Natalie Jaresko and central bank chief Walerija Gontarewa to the IMF in return for billions in loans at a restructuring of foreign currency loans only voluntary solutions between banks and Kredtnehmern support. Tucked away in Article 19 of the “Memorandum on economic and financial policy,” said the government: If the Ukrainian parliament “adopted a law that stipulates the forced conversion of foreign currency mortgages (contracts) on hryvnia-based, the President will veto it.”

In Poland, however, the government may soon dancing to a different-sounding music. During the presidential campaign suggested Andrzej Duda of the national populist party “Law and Justice” (PiS) to commit all currency loans at the rate obtaining on the date of signature. Duda won; In early August he is sworn in as President of Poland. Also in forecasts for the following in October parliamentary elections is Dudas PiS party leadership. And so it is quite possible that the translator Tomasz Sadlik itself only needs to wait a few months until a new Polish Government banking policy in his spirit.